Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005
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Mr. DURBIN. The argument behind this bankruptcy reform bill is it is not going to affect people in lower income categories. Senators on the other side of the aisle have come to the floor and said: Don't worry about this bill. Yes, it is stricter, you have to file more documents, it will cost more in legal fees, but if your income is lower than the median income and you file for bankruptcy, it does not affect you. You are exempt from it.
Senator after Senator has come to the floor and said that. I even asked Senator Sessions of Alabama on the floor yesterday: Is that your understanding, that if you are below median income you do not have to file all the papers for the means test? You don't have to go through some of the most harsh provisions of the bankruptcy bill? And he said yes, that was his understanding.
My amendment is very simple. It clarifies what has been said over and over again, that the means test does not apply to debtors who go into bankruptcy court whose incomes fall below the median level. It adds only two sentences to the bill. It makes it clear that those lower income debtors only have to show the court, first, the documentation already required under chapter 7, and then their monthly income. Once they show the monthly income, if it is below the median income in that area, they are exempt from the means test. That is all my amendment says.
Frankly, if colleagues on the other side of the aisle will not accept this amendment, I have to wonder whether they really believe this bill exempts lower income people. If it does not, it means everybody walking into bankruptcy court, not just those who can repay but many who have much lower salaries and incomes and cannot, is going to have to go through all of the procedural hooks and ladders set up by this S. 256. I don't think that is reasonable. It certainly is not the way this bill has been explained for the last 2 weeks. It is important that we read and recount what Senator Hatch said on February 28:
Let me tell you at the outset, the poor are not affected by the means test. The legislation provides a safe harbor for those who fall below median income.
The Republican leader came to the floor, and here is what he said:
This bankruptcy reform act exempts anyone who earns less than the median income in their State.
Those are the words of Senator Frist.
Senator Sessions:
I remind all of my colleagues that people who are economically distressed and have incomes below the median income already will be exempt from the means test.
If this is true, and I hope it is, there is no reason this amendment should not pass overwhelmingly, in fact by a voice vote. But if those who drew up this bill really want to put everybody through these means tests regardless of their income, even those in the lowest income categories, that is another story altogether.
We know that half the people who go to bankruptcy court today are there because of medical bills. They are people who ended up with a mountain of debt because of an illness in their family. Do you know what else? Three-fourths of those people filing for bankruptcy because of medical bills had health insurance. They thought they had protected themselves and their families. They didn't have enough health insurance or they lost their job after the diagnosis. It happens.
What we are saying is if you are in one of those terrible situations where things have gone terribly wrong for your family and you are facing bankruptcy and you are in a low-income category, for goodness' sakes, why would we heap more procedural requirements, more cost, more paperwork, more demands on the poorest among us?
This amendment says what three Republican Senators have said on the floor word for word: If you are below the median income, you do not have to fill out the papers for the means test. I hope my colleagues, those who came to the floor and said this over and over again, agree to this amendment.
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We are going to have several amendments this morning. Each one of these amendments tries to clarify this bill. This bill is being driven by the credit card and banking industry, you know, the same people who fill your mailbox with credit card applications you never asked for, the same people who show up at the Big Ten football game trying to peddle their credit cards to students--the same people are pushing this bill. They want folks to get deep in debt and if they file for bankruptcy never get out from under the debt--keep paying it for a lifetime: a literal debtors' prison.
If we truly want to exempt the lowest income Americans from the worst provisions and toughest provisions of this bill, I encourage all of my colleagues to support amendment No. 110.
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Mr. DURBIN. Mr. President, this bankruptcy reform bill before the Senate, S. 256, is a 500-page bill, which has been the dream of the credit card industry, banks, and financial institutions across America for almost 10 years. What they are trying to do in this bill is make it more difficult for someone to have their debts discharged in bankruptcy.
Now, of course, everyone understands our legal and moral obligation to pay our debts. But we recognized a long time ago that some people get into a situation where they are swamped with debt and cannot get out from under it. In the old days, they were relegated to debtors' prisons; they literally imprisoned them. In more civilized times, the decision was made to have a civil court procedure, where you could go in and have your debts released, surrendering virtually all of your assets to start over. That is happening in America today. About 1.3 million Americans go into bankruptcy court for personal bankruptcies.
The credit card industry and the banks say too many people are getting their debts discharged. So we are going to set up a new process in the bankruptcy court where we are going to ask more questions than ever and try to determine whether the person filing for bankruptcy could conceivably pay back, over the next 10 years, $165 a month. And if they can pay back $165 a month, we will not discharge their debts. They will end up walking out of court with the same debt they carried in, in most cases.
Now, for a lot of people, you would say, if you can pay back something, you ought to pay it back. But for many people, it means the debts they have incurred that they cannot pay back will be dogging them and burdening them for the rest of their natural lives. So many of us have said when you take a look at this bill, at least be sensitive to some people who go into bankruptcy court through no fault of their own.
Senator Kennedy talked about people with medical bills, because of a medical crisis in their family. A woman goes to the doctor with a lump on her breast, and a mammogram shows it is breast cancer. She goes through extensive radiation, chemotherapy, all sorts of recovery time; she cannot go back to work, and the bills mount up sky high and complications ensue. That is nothing that she has done wrong. There is no moral failure there. If her health insurance is not good, she is left in a position where she can never, ever pay back the bills. That is not a person who should be put through a more rigorous procedure in a bankruptcy court.
Senator Kennedy said that if you don't do anything else for that poor woman and her family, at least say at the end of the bankruptcy court hearing she will still have a home, a roof over her head. So we asked for a $150,000 homestead exemption so that a person could at least have a modest home to return to after bankruptcy from a medical illness. That amendment was rejected. Everybody on the other side of the aisle voted against it.
I offered an amendment and said, what about the men and women in uniform today, the Guard and Reserve who are being activated. They joined thinking: once a year I may have to serve my State, my country for a month or so. Now we are calling them into battle for a year, a year and a half, and no end is in sight.
What if you were a member of the Guard? You have sworn to protect this Nation. You are called into combat and leave behind your family and your business. And what if the business fails because you are gone? What if you are forced into bankruptcy? Could we not at least include language in this bill to give special consideration to the men and women in uniform who are answering their Nation's call and may face bankruptcy? I lost that amendment 58 to 38. Not a single Republican would vote in favor of that amendment.
The last amendment I am going to offer, much to the relief of my Republican colleagues, is one which asks my friends on the other side to take one last look at this issue. Instead of applying that special treatment or giving some help to all soldiers, guardsmen, and reservists who serve and may lose a business or go into family bankruptcy because they are overseas for America, I ask my colleagues on the other side of the aisle to consider this: How about disabled veterans whose indebtedness occurred primarily while they were serving America?
I have met some of these veterans at Walter Reed Hospital. They have lost limbs. They face terrible injuries. If they face a bankruptcy that occurred because of debts that happened while they were in service to our country, should we not give these disabled veterans a fighting chance in bankruptcy court? Should we not spare them the hurdles, obstacles, paperwork, and legal bills that the credit card industry is demanding for people who go to bankruptcy court? This exemption will especially help recently disabled veterans who, in addition to their physical loss, have terrible financial difficulties.
The bankruptcy bill makes petitions for debt relief under chapter 7 subject to a means test. I had a chart before. It is a long chart. Not only do you have to file all the documents to go into bankruptcy court, but this new 500-page bill lays it on you again and makes you file another ton of documents to see if maybe you could pay back $150 or $175 a month over the next 10 years.
So I am giving relief to disabled veterans. I am not going to apologize for that. A lot of us get up on the floor and praise them for what they have done. We should. For goodness' sake, they are protecting us, our families, and our homes. Is it too much to ask that we give them a break in this harsh bankruptcy bill from the worst part?
The amendment specifies the exemption applies only if ``the debtor is a disabled veteran and the indebtedness occurred primarily'' while they were on active duty. To qualify for this exemption, a disabled veteran must have incurred most of their indebtedness--more than 50 percent of their indebtedness--while on duty.
The Disabled Veterans of America estimates there are 2.3 million disabled veterans. According to the Department of Veterans Affairs' annual report, the average disabled veteran receives only $7,861 in disability compensation each year. That is not a lot on which to live. Sadly, this amount varies widely. Veterans in some States do much better than veterans in others. Unfortunately, my home State falls into the ``others.'' We receive less than half on average of disability payments paid in other States.
In considering whether to support this amendment, I invite my colleagues to reflect for a moment on the physical and financial situations some of our disabled veterans face. Their hardships today, combined with their earlier service, make them twice heroes, in my book. If any group of people deserves some relief from this burdensome process, it is America's disabled veterans who suffered physical and financial devastation while they were wearing a military uniform and risking their lives for America.
I invite all my colleagues from both sides of the aisle to join me in cosponsoring this amendment and make this rather small but I think deeply worthwhile adjustment to the bankruptcy bill.
It is my understanding that Senator Leahy will be coming to the floor momentarily, unless Senator Grassley seeks recognition at this point.
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